Bitcoin has crashed.
From its record high last month near $65,000, bitcoin fell almost over 50 percent as low as 30,000 last week, following negative tweets by Elon Musk, the world’s second-richest man, about bitcoin’s energy consumption.
Bitcoin is rocketing.
Having started the year at $29,000, bitcoin, which counts among its many investors Tesla supremo Elon Musk, hit $40,000 yesterday. It is up 40 percent this year, making it one of the world’s best performing assets.
Wait a minute, which is it? Is bitcoin soaring or crashing?
The answer is both. Both narratives are true, though they tell very different stories. Musk may have criticised bitcoin, but he still owns it. Bitcoin has crashed, but it is still one of the best-performing assets in 2021. Which narrative you subscribe to will depend on where you stand in the great bitcoin divide.
The divide spans political ideology. Those who favour free markets and individual responsibility tend to like bitcoin. Those who favour central planning over individual choice don’t.
It spans generations. The young love it – it’s their revenge for being excluded from the housing market. The old are baffled.
It even spans the energy divide. Some say bitcoin is bad for the environment because it consumes a lot of energy. Others will remind you 75 percent of bitcoin energy consumption comes from renewables, and that it is accelerating the adoption and development of cleaner energy forms.
Some say bitcoin is bad for the environment because it consumes a lot of energy
So much of the divide just boils down to those that have tried the tech, and those that haven’t. Those who use it generally agree that bitcoin is the future of finance, those who don’t tell you it is a bubble.
But again, both are true. It is a bubble. It’s also the future. Bubbles almost always accompany breakthrough technologies – see the internet and railways for more details.
And so to more pressing matters. What’s all the recent noise been about? And what’s going to happen next?
Over the course of the last month or three bitcoin has gone up a lot then come down a lot. Accompanying these movements have been tweets from the world’s most attention-seeking billionaire, Elon Musk. First, he had bought bitcoin. Price goes up. Then Tesla, his company, Tesla, was no longer accepting bitcoin because fossil fuels. Price goes down.
Tesla & Bitcoin pic.twitter.com/YSswJmVZhP
— Elon Musk (@elonmusk) May 12, 2021
Then it turns out he is meeting with the newly formed and self-elected Bitcoin Mining Council, which has been set up to “standardise energy reporting, pursue industry ESG goals, & educate+grow the marketplace”. Price goes back up again.
If it sounds silly, well, that’s because it is silly. Much though he may disagree, bitcoin is bigger than Elon Musk and that the market is rising and falling on his every tweet is symptomatic of something bigger. That is bitcoin’s energy consumption.
If there is another industry in the world that has it’s every joule calibrated and then judged, I’d like to know what it is. Do we tot up all the energy consumed by google searches and then, on the basis of how big or small that figure is, decide whether google searches are acceptable?
Do we tot up the total energy consumed by banks and credit card companies (to include the energy consumed by those banks that leave their lights on at night) and then demand a return to papyrus ledgers?
Do we tot up the total energy used/wasted by governments in their various endeavours, not to mention the rebuilding costs from the destruction they cause when they get involved in overseas conflict, and then audit them based on that?
Bitcoin is accelerating the adoption and development of cheap renewable energies
No, is the answer. And yet somehow bitcoin is subject to these analyses.
The bottom line. Bitcoin consumes large amounts of energy. 75% of that energy is renewable. Bitcoin is accelerating the adoption and development of cheap renewable energies. Much of the energy bitcoin consumes is in remote parts of the globe, energy that would otherwise not be consumed were it not for bitcoin. Bitcoin mining is thus bringing trade and industry to remote corners. Bitcoin‘s environmental footprint is miniscule compared to the energy consumption of legacy finance and the pollution, waste and damage it causes.
Nevertheless, it is an argument that will go on and on. But the environmental arguments risk hurting the perception of bitcoin. They are spreading false narratives. The truth normally outs in the end, but that doesn’t mean considerable upheaval before we get to that point.
Bitcoin badly needs to demonstrate that these arguments are badly framed and false. Getting Musk onside will help, but beware self-appointed councils. Bitcoin is supposed to be leaderless.
Much though he may disagree, bitcoin is bigger than Elon Musk and that the market is rising and falling on his every tweet is symptomatic of something bigger
The last time a load of big-time bitcoin players got together and then attempted to speak on behalf of the industry was 2017. The result was a civil war that made Brexit look harmonious.
So to the matter we care about more than anything: the price. Is bitcoin going to go up or down?
On this correction $30,000 has so far proved support – as it was back in January. As long as we stay above $30,000, I’m happy. It means we have a double bottom in place, a W, and this is a chart pattern that tends to play out positively. If $30,000 holds I don’t see any reason why this can’t be a launch towards $100,000.
This would then just have been one of those typical mid-cycle sell-offs that you get in bitcoin bull markets.
There will be barriers on the way up, not least at $42,000, and I’d like to see us above there too, but the key issue is to stay above $30,000. If we don’t then I fear we go back to $20,000. $20,000 is another pivotal price point – the all-time high from back in 2016-2017. I have to say, I really would not be surprised to see it go back there – I hope it doesn’t, but bitcoin is a frustrating beast.
If it does go back there, then I think $12,000 comes into play. Let’s have that chat another day – and hope we never have to have it.
For now it’s a battle of narratives. If bitcoin is deemed bad for the environment and governments come after it, then it will have a battle on its hands and $20,000 comes into play. But if it wins the battle of ideas, then we can go higher a lot quicker.
*Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.
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